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When US Bank Needs an Assignment from Option One – Who Sold the Mortgage to Lehman’s… John Carney Gives Us All a Good Laugh

11 Jan

We really loved this fictional conversation between US Bank and Option One created by John Carney for his NetNet article over at CNBC… Too Funny. The article is here:

Why It Could Be Very Hard for Banks to Avoid Ibanez Mortgage Catastrophes

Here’s the excerpt:

It might not be so easy. Let’s say you are US Bancorp and you find yourself with a mortgage whose chain of title is incomplete. You took the mortgage from a now bankrupt subsidiary of the now bankrupt Lehman Brothers. Getting someone at Lehman to go through the process of executing the assignment is going to be very difficult. It’s not even clear if anyone at Lehman Brothers has the legal authority to execute an assignment now, while Lehman is bankrupt.

In any case, getting the assignment from Lehman wouldn’t really help you. You’d still have a gap in the chain from Option One to Lehman. It’s probably best to skip over Lehman all together and go directly to Option One to ask for the assignment.

But you have a bit of a problem. You didn’t buy the mortgage from Option One. They aren’t under any contractual obligation to you to execute any documents. So when you call, here’s how the conversation goes.

US Bank dude: “Hey, can I speak to whoever it is who is handling the Ibanez mortgage?”

Option One guy (after some delay): “No one handles that mortgage. We sold it five years ago to Lehman and closed the file.”

US Bank: “Right. Okay. Well, I need you to find someone who will execute an assignment of the mortgage to me.”

Option One: “First of all, no one who handled that mortgage still works here. You might have heard about the mortgage meltdown, right? Second, we sold it to Lehman, according to the file.”

US Bank: “Right. But I bought it from Lehman.”

Option One: “So get the assignment from Lehman.”

US Bank: “They’re an empty company that is in bankruptcy.”

Option One: “I’ve heard about that. Thanks for the news.”

US Bank: “So I need you to execute the assignment.”

Option One: “First of all, you’re going to have to show me that you bought the loan from Lehman. Second, I need to talk to legal to make sure I can assign a mortgage to someone we never dealt with. Third, how much are you willing to pay me to do all this?”

US Bank: “Pay you? I already own the mortgage.”

Option One: “The mortgage we sold to Lehman. If Lehman asks for the assignment, we’ll do it as part of that deal. But, as far as I can tell, I don’t owe you anything. If you want an assignment, you’re going to at least be paying the legal bills for the legal opinion that says it’s okay for us to do this.”

US Bank: “You don’t have to be an [expletive deleted] about this.”

Option One: “I also don’t have to give you an assignment.”

By the way, if you do get Option One to assign it to Lehman, you might find yourself trapped. In that case, the mortgage arguably becomes part of the estate of Lehman—subject to the jurisdiction of the bankruptcy court. Sure, eventually, you may be able to prove that you are entitled to the assignment from Lehman. But you’ll be fighting the other creditors, who will argue that you are just one more unsecured creditor in a long line of people who say that Lehman owes them something.

 
 

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